Home Business Expose

by Gary Foreman

Dear Dollar Stretcher,
What can you tell me about a deal of making money on the internet just by having your own website and giving free items away for shipping? There seems to be a guarantee to get your money back if you are not satisfied or can't make money on it.

I don't mean to ruin Peggy's dream, but this offer looks like a scam. But it's better to be disappointed now rather than disappointed and poorer later. Let's look a little closer at what's being proposed.

Peggy will need a website. Instead of a free blogger site, I'm betting that they'll want her to pay for the site and it's upkeep. Maybe just a few dollars a month, but still a charge to her card every month. Plus it will take some time to set up, even with the templates that they'll have available.

Once Peggy has a website, she'll need to get people to visit it. Having free stuff won't be enough. Just for fun we put "free" into Google. It returned over 17 billion listings! The reality is that she'll need to buy paid advertising to attract visitors to her blog.

But suppose that she does get people to visit. And they do agree to pay shipping and handling for the 'free' stuff. How much can the company really afford to pay Peggy to give away merchandise?

If the offers are good, they don't need her. Word-of-mouth will bring people to the company website without her help.

More likely, the offers aren't really that good. A few years ago, marketers started offering all kinds of items for free on the internet. The catch was that many of them had shipping and handling charges that were more than the item cost locally.

So maybe Peggy doesn't do so well and decides to get her money back. A 'money-back guarantee' is only as good as the company offering it. Millions of people have tried to get their money back only to find out that the guarantee was no better than the original offer.

We'd hope that the company would stop charging her credit card if Peggy asked them to discontinue. But it's not unusual for charges to continue for months even after a 'stop' notice has been sent.

Why am I so sure that this offer is a scam? There are a couple of reasons. First, the company doesn't appear to want any talents or skills that Peggy has to offer. Only her checkbook. If it's a job that 'anyone can do' then it won't pay very well. And, you won't have to invest your money to get the job.

Second, the business plan that Peggy is supposed to execute doesn't make sense. How is she going to compete with everyone else to get visitors to her free stuff page? What makes her offer unique and worthwhile?

Finally, the company's business plan does make perfect sense. Buy one server and connect it to the internet. Set up hundreds of people like Peggy with websites. Charge them each month for web hosting services. Even if Peggy doesn't make a dime, the company will make plenty.

Peggy can check out the proposal by doing a little homework. First, find out how much the website will cost to set up and maintain. Ask about any other start-up expenses that she'll be asked to cover.

Then look at the free items that are being offered along with the S&H charges. How do they compare to shopping at your local discount center? Will people want them?

Next, find out how much she'd make on each free item that's 'given away'. Do the math to figure out how many items will need to be given away each month to cover her expenses.

Finally, how many visitors would she need to the website to give away enough items to be profitable? And what will it cost her to attract that many people each month?

Only if Peggy can work through all of this and determine that the business looks reasonable should she go forward with it. Many home businesses are started on a shoestring. But it's going to be hard getting to profitability when you have an initial investment and an ongoing monthly expense.

Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com. Gary shares his philosophy of money here. Gary is available for audio, video or print interviews. For more info see his media page.

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